One 97 Communications Ltd, the parent company of digital payments platform Paytm, plans to invest up to ₹500 crore in its wholly owned subsidiary Paytm Cloud Technologies Ltd (PCTL) over the next 12 months.
PCTL has also approved an additional investment of up to ₹500 crore in its wholly owned subsidiary Paytm Singapore Pte. Ltd. Both investments may be made in one or more tranches.
Funds to support expansion
The proposed investments are intended to meet the subsidiaries’ future working capital requirements, support investments and fund business expansion.
Paytm Cloud Technologies and Paytm Singapore are related parties of One 97 Communications. The company said both transactions would be undertaken on an arm’s-length basis.
The proposed funding could provide the subsidiaries with additional financial resources to support their business requirements and expansion plans over the coming year.
MDR changes expected to improve margins
Separately, Paytm expects a potential improvement in its payments processing margin (PPM) following the proposed implementation of merchant discount rate (MDR) charges on select payments.
According to the company’s statement, the National Payments Corporation of India (NPCI) has indicated that MDR implementation would take place immediately after Diwali, with the date to be notified separately.
PPM measures MDR revenue earned on payments gross merchandise value (GMV), net of payment processing charges. Paytm said the metric has been expanding structurally and is currently above four basis points.
Company estimates 2.5-basis-point uplift
Based on a proposed MDR cap of 0.4% on select payments above ₹2,000 made to non-industry merchants, and its current GMV mix, Paytm expects an indicative improvement of approximately 2.5 basis points in overall PPM.
The company expects the actual impact to stabilise over two to three quarters following implementation.
The potential margin improvement will depend on the final implementation details, the eligible transaction mix and the resulting revenue and processing costs.